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The NBA Coaching Market Is A Bubble Waiting to Burst

As of 12:01 this morning, NBA free agency officially took over the basketball universe. There are franchise-altering transactions waiting to be finalized, ridiculous contracts to be handed out, and who knows, teams might even make a few rational moves before all's said and done. But there's another market that's been even more intriguing: the craziness that's become the NBA coaching market.

By now, you must have heard about Jason Kidd's failed power play to usurp general manager Billy King and take control of the front office in Brooklyn, and how he managed to land on his feet several days later, set to be introduced as head coach of the Milwaukee Bucks. For all the gruesome details, here's a summary.

Aside from the betrayal, and the ridiculous assessment of self worth from Kidd, what stood out for me was how Kidd was able come out of the situation with double the salary. Last season, the Nets gave him a four-year deal worth $10.5 million. According to reports, he will make up to $5 million per season in Milwaukee. Kidd was apparently motivated to push for a promotion and raise because of the recent hirings of Steve Kerr and Derek Fisher, who have won championships as players but have yet to coach an NBA game. In other words, exactly the position Kidd was in when he was hired last year. But both Kerr and Fisher received identical five-year, $25 million deals, a much higher starting rate than Kidd.

As Mark Deeks of HoopsHype observed last month, teams are increasingly spending in areas where they're not prohibited by salary cap limitations and luxury tax penalties. These areas include scouting, the hiring of executives and as we've seen in the last couple of weeks: the investment of significant dollars towards coaches.

Just for the sake of completeness, you should know Tyronn Lue was just made the highest paid assistant coach in league history by the Cavaliers, in a deal that will pay him up to $2 million per season.

So, where is this all headed? We have an awkward overlap in the market where the incoming coaches make just as much—and in some cases, more—as the head coaches of the top teams. One example, Gregg Popovich just guided the San Antonio Spurs to their fifth NBA championship. He was paid $6 million this season. When you line up the salaries of Popovich, Erik Spoelstra, Frank Vogel, and Scott Brooks with the likes of Kidd, Kerr, and Fisher, the pay versus performance scale is a bit off.

A market correction is sure to occur, depending on how the new crop of coaches perform, the correction could take shape in several ways.

In one scenario, Kerr molds the Golden State Warriors into title contenders, Fisher revives the Knicks in New York, and Kidd somehow turns the Bucks into one of the best teams in the East. Executives and owners around the league, who are often just waiting to be inspired by the success of other teams, decide that coaching retreads are a thing of the past, and give the next line of players waiting for a coaching opportunity—Patrick Ewing, Rasheed Wallace, Chauncey Billups, and Sam Cassell, to name a few—the chance by offering them similar salaries.

The baseline for hiring an inexperienced coach would start at $5 million, and likely be driven higher if teams start bidding for the next hot commodity. Just look at the Kerr hiring. He registered interest with the Knicks and the Warriors, and that was enough to establish his asking price. The domino effect led to Phil Jackson securing Fisher with a similar contract in New York, and then, this whole Jason Kidd thing. As always, it only takes two teams in this league to start a bidding war and distort market values in a hurry. This applies for coaches as it does for players because that's how commodities work.

The impact of these signings may have wide ranging circumstances for other coaches in the league. Consider teams—such as Indiana and Oklahoma City—who have tasted regular season success in the past few seasons but came up short in their bids to win the title. Inevitably, the current head coaches may be sacrificed in order for the teams to sell to their fanbase that they've made that final move to take the final step of winning a championship. These teams would likely look towards veteran coaches, names like Jeff Van Gundy, George Karl, or Larry Brown, as potential hires. You can only imagine how much money they will command to return to the bench if the rookies are already getting a significant pay bump.

The same thought process would apply to the current crop of coaches who have won championships. They would surely be due for a significant raise as well.

Of course, all of this theoretical discussion of an increase in coaching salaries may be met with a "so what?" These owners are playing with large sums of money and they're not exactly scrutinizing a couple-of-million-dollar difference in what the coach is making. From a financial standpoint for the individual owners, that is true. But the larger outcome may be a permanent adjustment in the way coaches are compensated. The market value for a quality coach may finally reflect their importance.

The NBA is, without question, a league dictated by superstars. If you have one, you have a chance. Two legitimate superstars, and you're in it every year. Three? Well, you're more than likely to find yourself in the Finals if your team stays healthy. But coaches matter, too. From the 1986-87 to 2006-2007, a span of 21 seasons, only six coaches won the title: Gregg Popovich, Pat Riley, Larry Brown, Phil Jackson, Rudy Tomjanovich, and Chuck Daly. In recent seasons, we've added Doc Rivers, Rick Carlisle, and Erik Spoelstra to that list, but the fraternity of championship coaches, especially in the modern era, remains very exclusive.

It's challenging enough to assemble a roster with the stars required to contend, but even more difficult to ensure you take advantage of the window of opportunity by having the ideal head coach in place. For every Phil Jackson who has made it work with star rosters, we've had instance after instance of Mike Brown as a rebuttal.

As long as the current framework of the collective bargaining agreement remains in place, teams will continue to feel the squeeze of the limited window they have to contend with their current rosters. And with that, there will be a need for immediate results. It's nice to bring in someone like Kerr and entrust him with a Warriors roster that is built to win now. But if it doesn't happen, it's not hard to envision a scenario where management changes course after a season or two.

The truth is this: unless a new list of coaches start adding titles to their resume, there will only be a handful of coaches in the league who have the rings to command a hefty salary. By driving up the value of rookie coaches, these teams may be inadvertently helping to correct the market value of the coaches in this league who truly deserve the large salaries.

As it stands, the prices in the coaching market are a bit inflated at the moment when reviewing it as an overall. But give it a few years, and we might end up in a place where the best coaches are paid what they're truly worth. It's the other developing market worth keeping an eye on.